Argument preview: When is a civic task a “taking”?

Posted Mon, January 14th, 2013 10:46 pm by Lyle Denniston

At 11 a.m. Tuesday, the Supreme Court will hold one hour of oral argument on the power of government agencies to impose strict conditions on their willingness to issue a development permit, in the case of Koontz v. St. Johns River Water Management District (docket 11-1447). Arguing for Florida property owner Coy A. Koontz, Jr., will be Paul J. Beard II of the Pacific Legal Foundation in Sacramento, Calif. Sharing time on the other side will be Paul R.Q. Wolfson of the Washington office of Wilmer Cutler Pickering Hale and Dorr, for the Florida agency (20 minutes), and Deputy U.S. Solicitor General Edwin S. Kneedler, for the federal government as amicus (10 minutes)

Background

Under the Constitution, the government is not allowed to seize private property, and convert it to a “public use,” unless it is willing to pay the owner the current value of the property. But the Supreme Court has often made it clear that, if the government puts too tight a restriction on the use of private property, in order to advance some public policy goal, that, too, can amount to a seizure (technically, a “taking”) of the owner’s right to enjoy the use of the property. That usually arises in situations where a property owner wants to develop a piece of land or a site, and needs a permit to do so. Conditions may follow.

It is not easy, though, to define just when a limiting condition on development amounts to a “regulatory taking” that could violate the Fifth Amendment’s “just compensation” clause. Just how onerous can the condition be, and what is the necessary link between the condition and the public policy goal the government agency is seeking to promote?. The Court returns to that issue in a dispute over a Florida property owner’s desire to improve a 3.25-acre plot, located in wetlands, by dredging and filling the land.

The theory behind the concept of “takings” is that the government should not single out some people to bear the burden of promoting a public policy ambition, but should spread that duty around because everyone supposedly would benefit if that policy is successful. On the other side of the civic equation, though, is the notion that development of private property can often have an impact on a surrounding community, and it thus is only fair to require the property owner to take steps to offset or mitigate that impact — such as giving up some ground for schools that will serve the children in a new residential suburb.

Those civic demands on land use have come to be known by the word “exactions.” From two precedents the Court issued in 1987 and 1994, it is reasonably clear that a local or state government can impose such demands, but that there are constitutional limits. The quite simple issue the Court is now confronting, in the case of Koontz v. St. Johns River Water Management District, is whether those limits apply when a government agency lays down conditions before it will grant a permit to develop property.

In 1987, in the case of Nollan v. California Coastal Commission, the Court ruled that it was unconstitutional for a state agency to require the owner of beach-front property to allow others to cross that property as a condition for a permit to rebuild a home on the site. There has to be, the Court said, a sufficient link between the demand on the property owner and the public policy at issue. In this instance, the Court said, the planned new home would have no impact on public access to the beach, so the “easement” requirement was nothing short of “an out-and-out plan of extortion.”

In 1994, in Dolan v. City of Tigard, Ore., the Court decided that any attempt by a local government to require dedication of a part of private property to a public use had to be proportional to the public impact of the project. There had to be a case-by-case decision, the Court said, on whether the compelled surrender of a part of the property to public use was related to the community’s impact. In that case, the city had required the owner of a retail store to give up a portion of the property for flood control and traffic improvements, to offset the impact of a building a new store with a bigger paved parking lot that would increase rainwater runoff. That was too great a demand, according to the ruling.

Those two decisions are now understood to have imposed two restraints on exactions: a nexus limitation, and a proportionality test. Now before the Court is whether those two limitations protect Florida property owner Coy A. Koontz, Jr., who engaged — along with his now-deceased father — in an eleven-year battle with a local government agency over a plan to improve a part of his 14.2 acres of vacant land, east of Orlando in Orange County.

Koontz’s land has been zoned for commercial development, and it is close to two major roads in the neighborhood. Development on adjacent properties and public works projects, he has argued, caused the condition of his land to degrade. He sought to improve a little more than three acres of the land. That portion was deemed to be wetlands, serving as a wildlife habitat protection zone managed by St. Johns River Management District. In 1994, he asked the District to dredge and fill that portion of his land. In return, he said, he was willing to dedicate the remaining plot of nearly eleven acres to the state for conservation.

He later would contend that the District said it would give him a permit for his improvement plan, if he would agree to improve fifty acres of wetlands on the District’s property. Those lands, he said, were located between 4.5 and 7 miles away from his land. The work would involve replacing culverts and plugging some ditches. It was estimated that it would cost Koontz somewhere between $10,000 and $150,000 — depending upon who was estimating. He asserted that the District never gave him an explanation of how the off-site improvements were related to the improvements he planned to make on his own plot of land.

He refused to give in, and he was denied a permit. He then sued in state court, contending that the condition violated both of the Supreme Court’s major land-use decisions. A state trial judge agreed with his challenge, finding neither a “nexus” between the demand and Koontz’s own plan, nor a rough proportionality between the two. The judge found a “regulatory taking.” As a result, the District issued the permit Koontz had sought. But the property owner also was awarded $376,154 in damages for the unconstitutional conditions he had faced.

The District appealed, arguing that the two Supreme Court rulings apply only when permit approvals include the specific conditions the local government is demanding, and not to denials the result from a property owner’s refusal to abide by a condition in order to get a permit. When it finally issued the permit to Koontz, the District noted, it had not attached any conditions at all. After a middle-level appeals court ruled for Koontz, the case went on to the Florida Supreme Court. The District’s argument prevailed: the state high court said the Supreme Court’s rulings only apply to exactions imposed as part of permit approvals. There has to be a quid pro quo demand at the time the permit is issued, it said. Thus, it said, there was no “regulatory taking” in Koontz’s situation.

Petition for Certiorari

Koontz’s lawyers with the Pacific Legal Foundation, a conservative legal advocacy organization, took the case to the Supreme Court last May. The petition raised two questions: whether it amounts to a taking to deny a development permit for failing to satisfy government-imposed conditions, and whether the two tests under the Supreme Court’s precedents apply to his situation.

If the Florida decision stands, the petition argued, that ruling “threatens to effectively strip millions of Florida property owners of the important protections” afforded by the precedents in Nollan and Dolan. The ruling gives governments, it contended, the option of making demands for “land, money, or labor as conditions precedent to permit approval,” and in that way agencies “will be able to bully landowners into ‘agreeing’ to otherwise unconstitutional conditions as the heavy price of permit approval.”

It should not make any difference, Koontz’s counsel contended, when a government imposes such conditions — when it issues a permit with the conditions attached, or when it refuses to issue a permit when the landowner refuses to agree to them. The petition commented that three Justices of the Court had made clear, in dissenting from denial of review of a case in 2000, that the timing of an unlawful condition does not matter. In that case, Justice Antonin Scalia, joined by Justices Anthony M. Kennedy and Clarence Thomas, protested a California state court decision that reached the same conclusion as the Florida court had.

“A violation of the unconstitutional conditions doctrine occurs,” the petition asserted, “the moment the government demands that a person surrender a constitutional right in exchange for a discretionary government benefit.”

The Water District urged the Court not to hear the case, arguing first that Koontz had not raised the federal constitutional issue in his state court case, but rather pursued only a “takings” claim under the Florida constitution, keeping his federal claims for later pursuit in federal court. Thus, the lawyers for the District contended, the Supreme Court lacked jurisdiction to hear the case.

On the merits, the District’s counsel contended that the agency was acting only to protect the wetlands in the state, and had the authority to impose conditions to mitigate the destruction of wetlands that would occur on Koontz’s land. In this case, it contended, the District had refused the only mitigation offer Koontz had made, and he refused to offer any other. Instead of collaborating in an effort to protect wetlands, the brief in opposition argued, Koontz chose to sue. The conditions the District offered to Koontz at the end of their discussions, the agency said, would involve improvements in the same basin as Koontz’s own land. Under state law, the District is obliged to seek mitigation of harms to wetlands within the same basin, the brief said.

In reply, Koontz’s lawyers said that the Florida Supreme Court had rewritten the issues it would consider in the case, explicitly to bring before it the federal constitutional question about a “regulatory taking.” It explicitly decided that issue, against Koontz, so the federal constitutional controversy was properly before that Court and would be properly before the Supreme Court, the reply argued.

The Court granted review on October 5.

Briefs on the merits

Coy Koontz’s brief on the merits relied heavily upon the suggestion that government agencies often seek to reach a “deal” with owners of private property that are designed to escape the constitutional limitations that the Supreme Court has laid down. The doctrine of “unconditional conditions,” it argued, “has shielded countless Americans who seek a government benefit or permit from government ‘deals’ that would strip them of their constitutionally protected rights….In 1987, this Court expressly recognized the doctrine’s applicability in the land-use context in Nollan and, subsequently, in Dolan.”

The brief suggested that permitting agencies often try to move in stealth to impose conditions. Agencies, it said, do not commonly attempt “naked, uncompensated confiscations of land.” Instead, they have moved toward “confiscating property other than interests in real property — most often, money, in the form of either financing of public projects or payments of fees in-lieu of a land dedication. Yet the constitutional injury is the same.”

The Court’s two precedents, the brief contended, sought “to smoke out attempts by government agencies to circumvent the Takings Clause’s requirement that compensation be paid for property takings.” Nothing in the Clause or in Supreme Court rulings under it recognizes a distinction among the types and timing of “exactions,” according to the brief.

If the protections of the two precedents do not apply, then the government has no power to take property without compensation, the brief said. “The Takings Clause does not countenance a totally unlimited power to confiscate property in the permit process,” it added.

The Water District, in its merits brief, opened with a lengthy discussion of the state’s efforts to protect more than 20 million acres of wetlands in the state. This discussion clearly was aimed at giving a more benign cast to the actions of the Water District in its dealings with the Koontz family, including its efforts to offset the harmful impact it saw from the planned dredging and filling of the wetlands on the Koontz property. This presumably was aimed at countering the image that Koontz’s lawyers had sketched of an agency determined to skirt the law in order to grab private property or money without compensation. Indeed, half of the Water District’s entire brief on the merits was devoted to background recitations.

On the merits of the constitutional issue, the District’s filing argued that Koontz had no claim whatsoever to a claimed “taking,” because nothing was ever taken from him. Koontz, it said, “seeks compensation where the government has not taken any of his property. No decision of this Court supports a claim of compensation where the government has taken no property.” As the Florida Supreme Court had done in its opinion, the brief contended that the District never issued a permit to Koontz. But that reflects a contradiction within the state court’s opinion, since it elsewhere recounted that the District did issue permits and later paid damages for the “regulatory taking” that lower courts had found. Koontz’s own recitation of the record shows that the District did issue permits, without any of the conditions to which Koontz had protested.

What the state supreme court, and the District’s own brief, appeared to have concluded was that nothing was taken from Koontz because, when the permits were issued, there were no conditions attached.

The District brief fully defended the state supreme court’s rejection of the Nollan and Dolan precedents, arguing that those apply only when a government agency “exacts a condition for approval of a permit that, if imposed outside the permitting process, would itself amount to a taking for which just compensation would be constitutionally required.”

The agency’s brief also argued that the Supreme Court precedents do not apply to situations where a landowner is required to spend money in order to satisfy a condition of a permit. “The Supreme Court,” it said, “has never held that requiring a person to comply with a regulation constitutes a taking merely because the person spent money in order to do so. Such a holding would dramatically extend the just compensation requirement into previously uncharted areas.”

The federal government has entered the case in support of the Water District. Like the District, the federal brief on the merits opens with a discussion of the threat to the nation’s wetlands, and the need for government to take steps to mitigate that threat. The federal government, it noted, faces the need to deal with that same threat under the Clean Water Act. In deciding whether to issue permits to allow discharges of dredged or fill material into wetlands, it said, the government takes into account what the landowner could do to mitigate the effects.

More directly and pointedly than the Water District had done, the federal brief argued that an “exaction-takings framework” does not allow a claim based upon the government imposing as a condition the spending of money. Past precedents of the Court, the brief said, “are fully consistent with the conclusion that government denial of a permit cannot support an exaction-takings claim for compensation.” That, the government brief said, distinguishes the limitations imposed in Nollan and Dolan from what was attempted by the Florida agency.

“By contrast, when the government denies a permit based on a landowner’s refusal to accede to an impairment of a property right, the government neither takes that property right nor threatens to do so.”

The case has produced a significant outpouring of amici filings, with nine briefs on the side of Coy Koontz, and four on the Water District’s side. The sources are not surprising on either side. The support for Koontz comes from conservative legal advocacy or civil liberties organizations, from property owners and developers, from agricultural interests, and organizations promoted limited government agendas. The Water District is supported by nineteen states plus Washington, D.C., and Puerto Rico, by local government advocacy organizations, by a wetlands protection group, and by planners and land-use reform organizations.

Analysis

Starting with the fact that three of the current Justices have already strongly hinted that they do not see a distinction between takings claims based upon conditions attached to a permit and the denial of a permit for failure to meet conditions, Coy Koontz appeared to have a considerable advantage. Justice Antonin Scalia is fond of a phrase used in the Nollan opinion — referring to excessive demands by land-use permitting agencies as “extortion” — that strongly suggests a deep skepticism about the justifications for “exactions.” He had the support of Justices Kennedy and Thomas to take on this issue a decade ago, and they very likely were among the Justices voting to hear the Koontz appeal.

Counter-balancing the weight of those Justices’ apparent views is the strong support that the federal government is making on the Water District’s side of the case. The Justice Department brief has gone to considerable lengths to draw quite sharp distinctions between “exaction-takings” and other forms of “takings,” and those distinctions may impress some of the Justices. It is somewhat doubtful, though, that the Department will be equally persuasive in its attempt to rule out all “exaction-takings” when a permitting agency has imposed spending conditions on a permit. Koontz and its amici supporters have expended considerable effort to show that a demand for money should fail if it does not meet the “nexus” test of Nollan.

The Court is not likely to spend a great deal of time sorting out the facts, but they are confronted with one direct conflict that they may have to resolve: were the mitigation conditions suggested by the Water District quite remote from the harms to wetlands that the District saw in Koontz’s planned dredging and filling, as Koontz argues, or were they closely associated with mitigation in the same water basin, as the District contends? Sorting that out could be crucial to both the “nexus” and “proportionality” tests –assuming, of course, that the Court is inclined to find that those requirements do apply to the denial of permit situation.

Either way, on the merits and on the facts, this case is likely to achieve historic proportions in sorting out what appears to be a new wave of permitting agency attempts to find alternative ways to advance public policy goals through rigorous management of the land-use permit process.

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